Delhi High Court
Royal Construction Company Pvt. ... vs National Projects Construction ... on 28 September, 2018
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ EX.P. 131/2015 & EX.APPL(OS) 643/2015, 1012/2015
Reserved on: 13th September, 2018
Date of decision:28th September, 2018
ROYAL CONSTRUCTION COMPANY PVT. LTD.
..... Decree Holder
Through: Mr.Sudhir K. Makkar, Sr. Adv.
with Mr.Sarvam Ritam Khare,
Ms.Meena Sehrawat, Ms.Urvi
Kuthiala, Ms.Shweta Chaurasia &
Ms.Saumya Gupta, Advs.
versus
NATIONAL PROJECTS CONSTRUCTION CORPORATION
LTD. (NPCC) ..... Judgement Debtor
Through: Mr.Anup J. Bhambhani, Sr. Adv.
with Mr.Rajat Arora &
Ms.Vishalakshi Singh, Advs.
CORAM:
HON'BLE MR. JUSTICE NAVIN CHAWLA
1. The dispute that remains between the parties is in a very narrow
canvas and is whether the respondent has made full payment in terms of
the Arbitral Award to the petitioner or not. While the respondent admits
that an amount of Rs.1,26,32,320.08 had remained payable in terms of
the Award as on 12.09.2017 and had been duly deposited by the
respondent with the Registry of this Court on 11.01.2018 in full and final
satisfaction of the Award, the petitioner claims that even after deposit of
EX.P.No.131/2015 Page 1
this amount a further amount of Rs.1,38,75,302.46 remains due and
payable by the respondent to the petitioner as on 10.09.2018.
2. To understand the difference in this stand taken by the contesting
parties, the brief background from which it arises needs to be considered.
3. The Sole Arbitrator by his Award dated 10.08.2002 had passed the
following directions in favour of the petitioner and against the
respondent:
"I now summarize the quantified results details earlier,as
follows:
RESULTS
CLAIM N0.1 ALLOWED =ID 77113.000
CLAIM N0.2 DISALLOWED =
CLAIM N0.3 ALLOWED =ID 27461.880
CLAIM N0.4 ALLOWED =ID 60764.000
CLAIM N0.5 ALLOWED =ID 16547.26
CLAIM N0.6 ALLOWED =ID 12000
CLAIM N0.7 DISALLOWED =
CLAIM N0.8 ALLOWED =ID 23720
CLAIM N0.9 DISALLOWED =
CLAIM No.l0 ALLOWED =ID 93750
TOTAL ID 311356.14
The interest on the allowed claims is 12% p/a from the date
of commencement of arbitration proceedings i.e. 26.9.1988
upto the date of payment.
BANK GUARANTEE ALLOWED Rs. 20,00,000
The claimant is entitled to an interest of 12% p.a. from the
date of encashment of Bank Guarantee upto the date of
payment
COUNTER CLAIM
EX.P.No.131/2015 Page 2
COUNTER CLAIM No.1 DISALLOWED =
COUNTER CLAIM No.2 ALLOWED =ID 25000
COUNTER CLAIM No.3 ALLOWED =ID 14920
COUNTER CLAIM No.4 ALLOWED =ID 9159
COUNTER CLAIM No.5 DISALOWED =
COUNTER CLAIM No. 6 ALLOWED =ADJUSTED
IN CLAIM N0.5
COUNTER CLAIM No. 7 ALLOWED =ID 38500
COUNTER CLAIM No. 8 ALLOWED =12% p.a. on
allowed counter claims
TOTAL = ID 87579
The respondent is entitled to an interest of 12% p.a. on the
counter claims allowed from the date of commencement of
arbitration proceedings i.e. 26.9.1988 to upto the date of
payment.
After setting off the allowed counter claims of the
respondent against the allowed claims of the claimant. I
thus make the award as follows:
a. The respondent shall pay ID 223777.14 (Two lakh
Twenty three thousand seven hundred seventy seven
and point one four) to the claimant alongwith 12%
interest p.a. from the date of commencement of
arbitration proceedings i.e. 26.9.1988 upto the date of
payment.
b. The respondent shall also pay to the claimant a sum of
Rs.20,00,000/- (Rupees Twenty lakhs) alongwith 12%
interest p.a. from the date of encashment of bank
guarantee upto the date of payment.
c. The amount payable in ID shall be convertible into US
dollars as per the original agreement dated 29.6.1982.
Further, all payments of settlement in foreign
exchange shall be made as per original agreement and
Government rules.
d. There shall be no order as to costs and the parties are
left to bear their own costs."
EX.P.No.131/2015 Page 3
4. The respondent challenged the above Award by way of a petition
under Section 34 of the Arbitration and Conciliation Act, 1996
(hereinafter referred to as the 'Act'), being OMP 374/2002. The Single
Judge of this Court, vide order dated 26.05.2008, dismissed the said
petition. The respondent, being aggrieved of the said order, challenged
the same by way of an Appeal under Section 37 of the Act, being
FAO(OS) 589/2009. The Division Bench of this Court passed the
following Interim Order on 26.11.2009:
"Subject to the deposit of the principal amount in this
Court within four weeks from today, issue notice to the
respondent to show cause as to why the appeal be not
admitted, returnable on 22nd January, 2010.
In the meanwhile, subject to the aforesaid deposit being
made within the stipulated time, the award shall not be
executed."
5. It is not in dispute that pursuant to the above order, the respondent
deposited a sum of Rs.1,14,48,374/- with the Registry of this Court on
07.12.2009.
6. On 18.02.2011, the Division Bench of this Court passed the
following Interim Order:
"Learned Senior Counsel for the Appellant states, on
instructions, that a further sum of 36,00,000/- shall be
deposited with the Registrar General within four weeks."
7. It is again not in dispute that the respondent deposited a further
sum of Rs.35,51,626/- with the Registry of this Court pursuant to the
above order.
EX.P.No.131/2015 Page 4
8. The Division Bench of this Court by its Final Order dated
19.05.2014 disposed of the above Appeal modifying the rate of interest
to 6% p.a. and clarifying that the date of conversion should be one when
the Award was pronounced. As far as the amount deposited by the
respondent is concerned, the Division Bench passed the following
direction:
"17. The appeal is disposed of in aforesaid terms noting
further that the amount received by the respondent pursuant
to the orders passed by this Court would fall short of the
amount payable to the respondent as per the award and as
modified by us. Thus, the security furnished by the
respondent is discharged."
9. The above order was carried in Appeal before the Supreme Court
and the order passed by the Division Bench of this Court was set aside by
the Supreme Court by restoring the direction given in the Award by the
Arbitrator.
10. By judgment dated 26.05.2017 the Single Judge of this Court
decided the conversion rate of US Dollar to Indian Rupee that would be
applicable to the Award. The said judgment has been challenged by the
Decree Holder in form of an Appeal, which is stated to be pending
adjudication.
11. As noted above, it is the case of the Decree Holder that even
taking into account the judgment dated 26.05.2017 passed by the Single
Judge of this Court, a further amount of Rs.1,38,75,302.46 remains due
and payable by the respondent to the petitioner as on 10.09.2018, which
is disputed by the respondent.
EX.P.No.131/2015 Page 5
12. It is not in dispute between the parties that in terms of the Award
and applying the conversion rate as held by the Single Judge of this
Court by its judgment dated 26.05.2017, an amount of Rs.69,69,120.92
would be due and payable as principal amount in terms of the direction
(a) in the Award. Further, Rs.20 lacs would be due as principal in terms
of the direction (b) of the Award. It is also not in dispute that as on the
date of the first deposit made by the respondent in compliance with the
Interim Order dated 26.11.2009, passed by the Division Bench of this
Court in FAO(OS) 589/2009, an amount of Rs.3,20,83,410.80 was due
and payable by the respondent to the petitioner along with interest.
13. As noted above, against the said amount, the respondent had
deposited a sum of Rs.1,14,48,374/- on 07.12.2009 and a further sum of
Rs.35,51,626/- on 14.03.2011. This is where the dispute arose. While the
respondent claims that the disputed amount should be appropriated
towards the principal sum as awarded by the Arbitral Award, the
petitioner claims that it is first to be appropriated towards the interest
payable in terms of the Award. Arising out of this dispute is the
submission of the respondent that as the amount deposited by the
respondent was in excess of the principal sum awarded in the Arbitral
Award, the respondent would be entitled to adjustment of interest earned
on the excess amount so deposited from the date of such deposit, while
the petitioner contends that as no part of the principal sum, as directed by
the Arbitral Award had been deposited by the respondent, not only is the
respondent not entitled to interest on the amount so deposited but also the
interest liability against the respondent on the principal sum adjudicated
by the Arbitral Award continues to run till date. This controversy
EX.P.No.131/2015 Page 6
between the parties is best highlighted by reproducing the calculation
submitted by them during the course of the hearing.
14. The calculation submitted by the respondent is reproduced herein
below:
S.N. Particulars as Amount Amount Paid Amount
per Award dated Payable in INR Receivable
10.08.2002 and
various Orders
passed
1. Total Iraqi Dinar ID
payable as per 2,23,777.14
Award dated
10.08.2002
Conversion of 1 3.37778 US
Iraqi Dinar into $
US $
Rate of Rs. 9.220/-
conversion into per US $
Indian Rupees per
US $ in June,
1(A) Total Iraqi Dinar ID Rs.
Payable in Indian 2,23,777.14 69,69,120.92
Currency X 3.37778
US $ X Rs.
9.220/-
2(A) Payable amount Rs. Rs. 20,00,000/-
of Bank 20,00,000/-
Guarantee
Principal Amount Rs. 1,14,48,374.35
deposited in Court
on 07.12.2009
EX.P.No.131/2015 Page 7
AA Differential Rs.
amount (i.e.
24,79,25
Principal amount
deposited in Court 3.43
Rs.
1,14,48,374.35
minus Actual
Principal amount
as per Judgment
dated 16.05.2017
- Rs.
89,69,120.92/-)
3(A) Total ( = Rs. Rs. Rs. 1,14,48,374.35 Rs.
89,69,120.92 89,69,120.92 24,79,253.4
1,14,48,374.35/-)
1(B) Interest payable Rs.1,77,24,861.
on amount 18
payable in Rs.
69,69,120.92/- @
12 interest p.a.
from the date of
commencement
of arbitration
proceedings i.e.
26.9.1988 upto
the date of
payment i.e.
07.12.2009
2(B) Interest payable Rs.
on amount 53,72,712.33
payable on Rs.
20,00,000/- @
12% interest p.a.
from the date of
encashment of
bank guarantee
(i.e. 16.07.1987-
as per Award)
upto the date of
EX.P.No.131/2015 Page 8
payment i.e.
07.12.2009
TOTAL Rs.
AMOUNT 2,30,97,573.51
PAYABLE IN
INR. (I.E. 1(B)
PLUS 2(B)
BB Interest @ 7.25% Rs.
under FDR on 18,51,051
AA from
08.12.2009 till
12.09.2017 as
applicable from
time to time, if
the said amount in
the account of
NPCC
CC Additional Rs. 35,51,626/- Rs.
amount deposited 35,51,626/-
in Court on
14.03.2011
DD Interest @ 8.50% Rs.
under FDR on CC 25,83,323/-
from 14.03.2011
till 12.09.2017 as
applicable from
time to time, if
the said amount in
the account of
NPCC
Total Receivable (AA + BB + CC+ DD) Rs.
1,04,65,253
.43
Total Payable (=Rs. 2,30,97,573.51/- Minus Rs. 1,04,65,253.43/-) Rs.
1,26,32,320
.08
EX.P.No.131/2015 Page 9
TOTAL AMOUNT PAYABLE IN INR. Rs. 2,30,97,573.51/-
(I.E. 1(B) PLUS 2(B)
Total Receivable (AA+ BB+ CC+DD) Rs. 1,04,65,253.43
Total Payable (=Rs. 2,30,97,573.51/- Minus Rs. 1,26,32,320.08
Rs. 1,04,65,253.43/-)
15. The calculation submitted by the petitioner is reproduced
hereinbelow:
CALCULATION SHEET CONSIDERING CONVERSION
RATE OF US DOLLAR TO INDIAN RUPEE AS PER THE
ORDER DATED 26.05.2017 PASSED IN
EX.P.NO.131/2018
1 AWARD AMOUNT IN ID 223777.14
IRAQI DINNAR (ID)
As per the Award:
".. The amount payable in
ID shall be convertible into
US dollars as per the
original agreement dated
29.06.1982..."
ie. 1 ID=3.37778 USD
Award Amount in US Dollar
after conversion as per the
conversion rate mentioned in
the original Agreement dated
29.06.1982.
1 ID=3.37778 USD USD 755869.95
(223777.14 x3.37778)
EX.P.No.131/2015 Page 10
3 Amount in Indian Rupees Rs. 6969120.92
considering conversion rate
as on June 1982 ie;
1USD=Rs.9.22 (USD
755869.95 x 9.22)
4 Interest on Award Amount @ Rs. 11607309.56
12% from 26/09/1988 to
10/08/2002 ie; 5066 days,
(6969120.92 x 5066/365 x
0.12)
5 Bank Guarantee Amount Rs. 2000000.00
Receivable
Interest on Bank Guarantee
Amount from the date of
encashment of Bank
Guarantee, (ie;16.07.1987,
as per the Award) upto the 3619068.49
date of Award, 10.08.200
(5504 Days), (2000000 x
5504/365 x 12%)
3 Amount Receivable as on the Rs. 24195498.97
date of Award, 10.08.2002
4 Interest from 11/08/2002 to Rs. 7887911.823
07/12/2009 ie;2675 Days on
Rs.6969120.92+Bank
Guarantee Amount
Rs.2000000=8969120.92
(8969120.92x2675/365x0.12)
5 Amount receivable as on Rs. 32083410.80
07/12/2009 (date of 1st
payment by NPCC)
EX.P.No.131/2015 Page 11
6 LESS: First payment made Rs. -11448374.00
by NPCC on07/12/2009 is
Rs.11448374
7 Total Amount receivable as Rs. 20635036.80
on 07/12/2009
8 Interest from 08/12/2009 to Rs. 1359374.71
14/03/2011 (Date of second
payment) ie;461 days,
(8969120.92x461/365x0.12)
9 Total Amount receivable as Rs. 21994411.51
on 14/03/2011
10 LESS: Second payment Rs. -3551626.00
received from NPCC Ltd. on
14/03/2011 is Rs.3551626
11 Amount receivable from Rs. 18442785.51
NPCC Ltd. as on 14/03/2011
12 Interest from 15/03/2011 to Rs. 7327648.93
02/01/2018 (Date of third
payment) ie;2485 days
(8969120.92 x2485/365 x.12)
13 Amount receivable from Rs. 25770434.43
NPCC Ltd. as on 02/01/2018
14 LESS: Third payment Rs. -12632320.00
deposited by NPCC in High
Court on 02/01/2018 is
Rs.12632320
15 Payment receivable from Rs. 13138114.43
NPCC as on 02/01/2018
16 Interest from 03/01/2018 to Rs. 737188.02
10/09/2018 ie;250 Days
(8969120.92x250/365x0.12)
EX.P.No.131/2015 Page 12
23 Amount receivable from Rs. 13875302.46
NPCC Ltd. as on 10/09/2018
24 Rounded Rs. 13875302.00
(Rs One Crore Thirty Eight Lacs Seventy Five Thousand
Three Hundred Two)
Note: The said conversion rate from US Dollar to
Indian Rupee as decided by the Order dated 26.05.2015
passed by HMJ Vibhu Bakhru is already under challenge
filed by the petitioner in EFA(OS) No.19/17 and submission
of this calculation sheet would not be construed as an
admission of this conversion rate."
16. As noted above, the primary dispute between the parties is whether
the amounts Rs.1,14,48,374/- and Rs.35,51,626/- deposited by the
respondent are to be adjusted against the principal sum awarded in the
Arbitral Award or against the interest so awarded. Learned senior
counsel for the respondent submits that as the Division Bench of this
Court in its Interim Order dated 26.11.2009 had directed the respondent
to deposit the principal amount in the Court, the amounts so deposited
have to be adjusted first against the principal sum awarded by the
Arbitral Award. In support of his contention he has placed reliance on
the judgments of the Supreme Court in Gurpreet Singh v. Union of
India, (2006) 8 SCC 457; Bharat Heavy Electricals Limited v. R.S.
Avtar Singh and Co., (2013) 1 SCC 243; and Himachal Pradesh
Housing and Urban Development Authority and Anr. v. Ranjit Singh
Rana, (2012) 4 SCC 505.
EX.P.No.131/2015 Page 13
17. On the other hand, learned senior counsel for the petitioner relying
upon the judgment of the Supreme Court in V.Kala Bharathi & Ors. v.
The Oriental Insurance Company Ltd., Br.Chitoor, 2014 (59) SCALE
449 and of this Court in Pramod Kumar Mittal & Ors v. Kiri Associates
(P) Ltd. MANU/DE/3909/2017, submits that as the full amount as
awarded in the Arbitral Award had not been deposited by the respondent,
the petitioner was within its right to appropriate the amount so deposited
first towards interest. As on such appropriation, even the full amount of
interest had not been deposited, there was no question of any amount
being appropriated towards the principal sum awarded in the Arbitral
Award and therefore, the interest on the principal sum so awarded
continues to run till date.
18. I have considered the submissions made by the learned senior
counsels for the parties and I am in agreement with the submissions
made by the learned senior counsel for the petitioner. In the present case,
it cannot be disputed that as on dates of such deposit, the amount of
Rs.1,14,48,374/- and Rs.35,51,626/-and Rs.1,26,32,320/- deposited by
the respondent pursuant to the Interim Orders passed by this Court were
not in excess of the interest payable by the respondent to the petitioner in
terms of the Arbitral Award. Therefore, the petitioner was within its
right to appropriate the said amount towards interest leaving the principal
sum outstanding thereby becoming entitled to further interest on the said
principal sum.
19. Reliance of the learned senior counsel for the respondent on the
order dated 26.11.2009 is totally ill-founded. Not only was it an Interim
Order of this Court but also the reference to the principal amount in the
EX.P.No.131/2015 Page 14
said order can only be construed as the quantification of the amount to be
deposited as a condition for stay on the enforcement of the Arbitral
Award during the pendency of the Appeal. To put it differently, the
Court could at that stage have also ordered that there would be a stay on
the enforcement of the Award on the deposit of Rs.1,14,48,374/-,
however, instead of quantifying the amount, the Court only as a matter of
convenience, stated that there shall be a stay on the enforcement of the
Arbitral Award on the deposit of the principal sum so awarded. This
does not mean that on deposit of the same, the same was necessarily to
be appropriated by the petitioner towards the principal sum awarded in
the Arbitral Award.
20. In any case, the orders dated 26.11.2009 and 18.02.2011 were
merely Interim Orders. They would cease to have effect once the Appeal
was disposed of by the Final Order dated 19.05.2014. The said orders, as
noted above, do not direct the appropriation of the amount deposited by
the respondent and released to the petitioner to be in any particular
manner. The appropriation of the amount so deposited, therefore, has to
be governed by the General Principles of appropriation of such amount.
21. In Gurpreet Singh (Supra), the Supreme Court has held as under:
"52. What is to happen when a part of the amount awarded
by the Reference Court or by the appellate court is
deposited pursuant to an interim order of the appellate
court or of the further appellate court and the awardee is
given the liberty to withdraw that amount? In such a case,
the amount would be received by the decree-holder on the
strength of the interim order and the appropriation will be
subject to the decision in the appeal or the further appeal
and the direction, if any, contained therein. In such a case,
if the appeal is disposed of in his favour, the decree-holder
EX.P.No.131/2015 Page 15
would be entitled to appropriate the amount already
received by him pursuant to the interim order first towards
interest then towards costs and the balance towards
principal as on date of the withdrawal of the amount and
claim interest on the balance amount of enhanced
compensation by levying execution. But on the part
appropriated towards the principal, the interest would cease
from the date on which the amount is received by the
awardee. Of course, if while passing the interim order, the
court has indicated as to how the deposited amount is to be
appropriated, that direction will prevail and the
appropriation could only be done on the basis of that
direction." (Emphasis supplied)
22. A reading of the above would clearly show that where a part of the
amount awarded is deposited pursuant to an Interim Order of the
Appellate Court and the awardee is given the liberty to withdraw that
amount, the appropriation of this amount shall be subject to the decision
in the Appeal or further Appeal and the direction, if any, contained
therein. If the Appeal is disposed of in favour of the awardee, he would
be entitled to appropriate the amount already received by him pursuant to
the Interim Order first towards the interest then towards the costs and the
balance towards the principal as on the date of the withdrawal of the
amount and claim interest on the balance amount; the exception being
where in the passing of the Interim Order, the Court had indicated as to
how the deposited amount is to be appropriated, in which case, that
direction will prevail and the appropriation could only be done on the
basis of that direction.
23. It is not the case of the respondent that while ordering the release
of the amount in favour of the petitioner, the Division Bench of this
EX.P.No.131/2015 Page 16
Court had directed the manner in which the amount so released has to be
appropriated by the petitioner. Therefore, the petitioner was within its
right to appropriate the said amount towards interest payable by the
respondent as on that date and claim further interest on the principal
amount that remained payable.
24. In Bharat Heavy Electricals Limited (supra), the Supreme Court
culled out the following principles of appropriation:
"31. From what has been stated in the said decision, the
following principles emerge:
31.1. The general rule of appropriation towards a decretal
amount was that such an amount was to be adjusted strictly
in accordance with the directions contained in the decree
and in the absence of such directions adjustments be made
firstly towards payment of interest and costs and thereafter
towards payment of the principal amount subject, of course,
to any agreement between the parties.
31.2. The legislative intent in enacting sub-rules (4) and (5)
is a clear pointer that interest should cease to run on the
deposit made by the judgment-debtor and notice given or on
the amount being tendered outside the court in the manner
provided in Order 21 Rule 1(1)(b).
31.3. If the payment made by the judgment-debtor falls short
of the decreed amount, the decree-holder will be entitled to
apply the general rule of appropriation by appropriating the
amount deposited towards the interest, then towards costs
and finally towards the principal amount due under the
decree.
31.4. Thereafter, no further interest would run on the sum
appropriated towards the principal. In other words if a part
of the principal amount has been paid along with interest
due thereon as on the date of issuance of notice of deposit
EX.P.No.131/2015 Page 17
interest on that part of the principal sum will cease to run
thereafter.
31.5. In cases where there is a shortfall in deposit of the
principal amount, the decree-holder would be entitled to
adjust interest and costs first and the balance towards the
principal and beyond that the decree-holder cannot seek to
reopen the entire transaction and proceed to recalculate the
interest on the whole of the principal amount and seek for
reappropriation." (Emphasis supplied)
25. A reading of the above would clearly show that if the payment
made by the Judgment Debtor falls short of the decreed amount, the
Decree Holder will be entitled to apply the general rule of appropriation
by appropriating the amount deposited first towards interest, then
towards cost and finally towards the principal amount due under the
decree.
26. The above principle was reiterated by the Supreme Court in the
judgment of V.Kala Bharti (Supra), holding as under:
"26. In view of above and more particularly keeping in
view the ratio of the Constitution Bench judgment
in Gurpreet Singh (supra) where considering an identical
question in respect of Order XXI Rule 1 of the CPC, it
was held that if the amount deposited by the judgment-
debtor falls short of the decretal amount, the decree-
holder is entitled to apply the rule of appropriation by
appropriating the amount first towards interest, then
towards costs and subsequently towards principal amount
due under the decree; we are of the opinion that the
appellants herein are entitled to the amount awarded by
the executing court, as the amounts deposited by the
judgment-debtor fell short of the decretal amount. After
EX.P.No.131/2015 Page 18
such appropriation, the decree-holder is entitled to
interest only to the extent of unpaid principal amount.
Hence, interest be calculated on the unpaid principal
amount."
27. In Himachal Pradesh Housing and Urban Development
Authority (Supra), the Supreme Court was confronted with the case
where the entire amount due in the Award had been deposited before the
High Court. In those facts, the Supreme Court held that the deposit of
the awarded amount into Court is nothing but a payment to the credit of
the Decree Holder. In the present case, admittedly the full amount
awarded in terms of the Arbitral Award had not been deposited by the
respondent on 07.12.2009 or 14.03.2011 or 02.01.2018. The said
judgment, therefore, would have no application to the facts of the present
case.
28. While I was finalizing the present judgment, in another case, the
respondent therein canvassing the same proposition as was being
canvassed by the respondent herein, placed reliance on the judgment of
the Supreme Court in Union of India & Anr. v. M.P. Trading and
Investment RAC Corporation Ltd., (2016) 16 SCC 699. I therefore,
considered the said judgment as well. In the said case, the Judgment
Debtor has deposited the principal amount before the High Court. In
paragraph 5 of the judgment, while confining the interest as per the
Award from the date of the Award till the principal amount was
deposited in the High Court, the Supreme Court further directed that the
respondent therein shall be entitled to interest in terms of the Award on
EX.P.No.131/2015 Page 19
the balance of the Award amount which the Appellant had failed to
deposit in Court as per the Award. This Court in NTPC Ltd. v. M/s V.U.
Seemon, 2016 SCC OnLine Del 698, considered the above judgment and
observed as under:
"10. This Court is of the opinion that the appellant‟s
contentions are unmerited. The judgment in H.P. Housing &
Urban Development Authority (supra) cannot be construed
as an authority given that in that case the entire amount
difference including interest was deposited in the court. We
notice that M.P. Trading and Investment Rac. Corporation
Ltd‟s case (supra) merely followed H.P. Housing & Urban
Development Authority‟s (supra) without dwelling upon the
rule of appropriation enunciated in Gurpreet Singh‟s case
(supra) by a larger Bench. Furthermore, R.S. Avtar Singh
and Co.‟s case (supra) too applied the appropriation
principle in the case of an arbitration award."
29. In view of the above, the judgment of M.P. Trading and
Investment RAC Corporation Ltd.(supra) is also of no assistance to the
case of the respondent.
30. Even otherwise, to accept the contention of the respondent would
be to give benefit of the pendency of the appeal filed by it to the
respondent, though the said appeal was eventually dismissed against it.
The petitioner cannot be made to suffer because of an Interim Order in an
Appeal, in which it finally succeeded. To do so would be against all
cannons of justice and equity and cannot be accepted.
31. In South Eastern Coalfields Ltd. v. State of M.P. and Ors. (2003)
8 SCC 648, the Supreme Court has held as under:
EX.P.No.131/2015 Page 20
"25. On the principle which we have upheld just
hereinabove, it would not have been necessary to enter
into this aspect of the issue, however, it becomes necessary
to deal therewith inasmuch as it was submitted on behalf of
the consumers/purchasers that their non-payment of
enhanced amount of royalty was protected by judicial
orders, though of an interim nature, passed by the courts,
and therefore, they should not be held liable for payment
of interest so long as the money was withheld under the
protective umbrella of the court order. Merely because the
writ petitions were finally held liable to be dismissed, it
cannot be urged that the interim orders passed by the
courts were erroneous. Soon on dismissal of their writ
petitions, the payment of the enhanced amount of royalty
which was disputed earlier was promptly cleared by the
writ petitioners and, therefore, their act was bona fide. We
find no merit in this submission either.
26. In our opinion, the principle of restitution takes care of
this submission. The word "restitution" in its etymological
sense means restoring to a party on the modification,
variation or reversal of a decree or order, what has been
lost to him in execution of decree or order of the court or
in direct consequence of a decree or order (see Zafar
Khan v. Board of Revenue, U.P.) In law, the term
"restitution" is used in three senses: (i) return or
restoration of some specific thing to its rightful owner or
status; (ii) compensation for benefits derived from a wrong
done to another; and (iii) compensation or reparation for
the loss caused to another. (See Black's Law Dictionary,
7th Edn., p. 1315). The Law of Contracts by John D.
Calamari & Joseph M. Perillo has been quoted by Black to
say that "restitution" is an ambiguous term, sometimes
referring to the disgorging of something which has been
taken and at times referring to compensation for injury
done:
"Often, the result under either meaning of the term
would be the same. ... Unjust impoverishment as well
EX.P.No.131/2015 Page 21
as unjust enrichment is a ground for restitution. If the
defendant is guilty of a non-tortious misrepresentation,
the measure of recovery is not rigid but, as in other
cases of restitution, such factors as relative fault, the
agreed-upon risks, and the fairness of alternative risk
allocations not agreed upon and not attributable to the
fault of either party need to be weighed."
The principle of restitution has been statutorily recognized
in Section 144 of the Code of Civil Procedure, 1908.
Section 144 CPC speaks not only of a decree being varied,
reversed, set aside or modified but also includes an order
on a par with a decree. The scope of the provision is wide
enough so as to include therein almost all the kinds of
variation, reversal, setting aside or modification of a
decree or order. The interim order passed by the court
merges into a final decision. The validity of an interim
order, passed in favour of a party, stands reversed in the
event of a final decision going against the party successful
at the interim stage. Unless otherwise ordered by the
court, the successful party at the end would be justified
with all expediency in demanding compensation and being
placed in the same situation in which it would have been if
the interim order would not have been passed against it.
The successful party can demand (a) the delivery of benefit
earned by the opposite party under the interim order of the
court, or (b) to make restitution for what it has lost; and it
is the duty of the court to do so unless it feels that in the
facts and on the circumstances of the case, the restitution
far from meeting the ends of justice, would rather defeat
the same. Undoing the effect of an interim order by
resorting to principles of restitution is an obligation of the
party, who has gained by the interim order of the court, so
as to wipe out the effect of the interim order passed which,
in view of the reasoning adopted by the court at the stage
of final decision, the court earlier would not or ought not
to have passed. There is nothing wrong in an effort being
made to restore the parties to the same position in which
EX.P.No.131/2015 Page 22
they would have been if the interim order would not have
existed.
27. Section 144 CPC is not the fountain source of
restitution, it is rather a statutory recognition of a pre-
existing rule of justice, equity and fair play. That is why it
is often held that even away from Section 144 the court has
inherent jurisdiction to order restitution so as to do
complete justice between the parties. In Jai
Berham v. Kedar Nath Marwari Their Lordships of the
Privy Council said: (AIR p. 271)
"It is the duty of the court under Section 144 of the
Civil Procedure Code to „place the parties in the
position which they would have occupied, but for such
decree or such part thereof as has been varied or
reversed‟. Nor indeed does this duty or jurisdiction
arise merely under the said section. It is inherent in the
general jurisdiction of the court to act rightly and fairly
according to the circumstances towards all parties
involved."
Cairns, L.C. said in Rodger v. Comptoir D'Escompte de
Paris: (ER p. 125)
"[O]ne of the first and highest duties of all courts is to
take care that the act of the court does no injury to any
of the suitors, and when the expression, „the act of the
court‟ is used, it does not mean merely the act of the
primary court, or of any intermediate court of appeal,
but the act of the court as a whole, from the lowest
court which entertains jurisdiction over the matter up to
the highest court which finally disposes of the case."
This is also on the principle that a wrong order should not
be perpetuated by keeping it alive and respecting it (A.
Arunagiri Nadar v. S.P. Rathinasami). In the exercise of
such inherent power the courts have applied the principles
of restitution to myriad situations not strictly falling within
the terms of Section 144.
EX.P.No.131/2015 Page 23
28. That no one shall suffer by an act of the court is not a
rule confined to an erroneous act of the court; the "act of
the court" embraces within its sweep all such acts as to
which the court may form an opinion in any legal
proceedings that the court would not have so acted had it
been correctly apprised of the facts and the law. The factor
attracting applicability of restitution is not the act of the
court being wrongful or a mistake or error committed by
the court; the test is whether on account of an act of the
party persuading the court to pass an order held at the end
as not sustainable, has resulted in one party gaining an
advantage which it would not have otherwise earned, or
the other party has suffered an impoverishment which it
would not have suffered but for the order of the court and
the act of such party. The quantum of restitution,
depending on the facts and circumstances of a given case,
may take into consideration not only what the party
excluded would have made but also what the party under
obligation has or might reasonably have made. There is
nothing wrong in the parties demanding being placed in
the same position in which they would have been had the
court not intervened by its interim order when at the end of
the proceedings the court pronounces its judicial verdict
which does not match with and countenance its own
interim verdict. Whenever called upon to adjudicate, the
court would act in conjunction with what is real and
substantial justice. The injury, if any, caused by the act of
the court shall be undone and the gain which the party
would have earned unless it was interdicted by the order of
the court would be restored to or conferred on the party by
suitably commanding the party liable to do so. Any opinion
to the contrary would lead to unjust if not disastrous
consequences. Litigation may turn into a fruitful industry.
Though litigation is not gambling yet there is an element of
chance in every litigation. Unscrupulous litigants may feel
encouraged to approach the courts, persuading the court
to pass interlocutory orders favourable to them by making
out a prima facie case when the issues are yet to be heard
EX.P.No.131/2015 Page 24
and determined on merits and if the concept of restitution
is excluded from application to interim orders, then the
litigant would stand to gain by swallowing the benefits
yielding out of the interim order even though the battle has
been lost at the end. This cannot be countenanced. We are,
therefore, of the opinion that the successful party finally
held entitled to a relief assessable in terms of money at the
end of the litigation, is entitled to be compensated by
award of interest at a suitable reasonable rate for the
period for which the interim order of the court withholding
the release of money had remained in operation."
32. In view of the above, the contention of the learned senior counsel
for the respondent that the amounts deposited by the respondent pursuant
to the Interim Orders have to be adjusted towards the principal sum
awarded by the Arbitral Award is without merit and is rejected.
Consequently, the claim of the respondent of interest on the alleged
excess amount deposited by it towards the principal sum is also rejected.
33. I find the calculation given by the petitioner and as reproduced
herein above to be correct and direct the respondent to pay the balance
amount due and payable by it to the petitioner within a period of four
weeks from today.
List on 14th November, 2018.
NAVIN CHAWLA, J
SEPTEMBER 28, 2018/Arya
EX.P.No.131/2015 Page 25
